Notes ACCA Paper F4 (GLO) Corporate and Business Law
Contents About ExPress Notes 3 1. Different Legal Systems 7 2. International Organisations 11 3. International Commercial Arbitration 16 4. Contracts for International Sale of Goods 18 5. Agency 24 6. Partnerships 27 7. Company Formation and Financing 30 8. Company Administration 39 9. Company Liquidation 47 10. Fraudulent Behaviour 52 Page 2
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Chapter 1 Different Legal Systems START The Big Picture ExPress Notes Exam questions in this area tend to be of the pure knowledge type often requiring a compare and contrast type approach. Although you are doing the global variant of the paper, it is perhaps worth bearing in mind that your examiner is also the examiner for the UK variant and is of course himself UK based. In the past, therefore, more marks have tended to be allocated to the UK details. The three main systems which you need to be aware of are: 1. Common Law eg. UK 2. Civil Law eg. France 3. Sharia Law eg. Iran Over the years, a popular question area has been to consider the role of judges under the different legal systems, sometimes working into the question the concept of judicial precedence. Page 7
Questions have also appeared occasionally requiring you to contrast legal proceedings under criminal law as opposed to civil law, where UK is taken as the example. CRIMINAL LAW V CIVIL LAW Under UK law the key differences are summarised in the table below. CRIMINAL Action brought by Crown Prosecution Service Claimant Action brought against Accused Defendant CIVIL Burden of proof required Beyond reasonable doubt Balance of probabilities Determination of guilt/liability Sentence/award determined by Minor offences = Magistrates Serious offences = Jury Minor offences = Magistrates Serious offences = Judge Judge (in rare instances Jury) Judge Case described as Regina v Jones Smith v Jones JUDICIAL PRECEDENCE This is primarily associated with common law systems and explains why in such systems judges are said to create law, as well as applying and interpreting the laws created by the legislative body. Judicial precedent brings a highly desirable consistency to the hearing of cases, in that provided the circumstances of a later case are essentially the same as an earlier one, the decision will be the same. Before applying an earlier case as a precedent, it will be necessary to have a positive response to the following questions: Was it based on a proposition of law? Was it part of the ratio decidendi? Page 8
Were the material facts of the case the same? Was the decision made in a court of equal or (more commonly) superior status? COMMON LAW Primarily associated with UK, but because of England s historical influence also to be found in many other countries, most notably perhaps in USA. Significant sources of law currently in UK are: Common law and equity which stem from the records of case law over many hundreds of years Statutory law which results from the passing of Acts of Parliament EU law applicable to UK as a member state In countries such as USA there are procedures for judicial review to ensure that no laws are passed which would be in breach of that country s written constitution (not applicable in UK as no written constitution). In UK there are various presumptions in relation to statutory law and guides and rules as to its interpretation that you should be familiar with. CIVIL LAW Main contrast with UK system is that civil law systems tend to use codification by means of legislation in order to try to bring understanding and certainty to the law. Countries adopting a civil law approach most normally have a written constitution. Significant sources of law currently in France are: Constitution Statutory law Administrative Regulations EU law In civil law systems, the role of judges is to apply the law and so there is much less guidance on interpretation of statutes and there is no formalised system of judicial precedent. Page 9
SHARIA LAW Major contrast with common and civil law systems, which are essentially secular, is the fact that Sharia law is specifically related to and founded upon the Islamic religion. The main sources of law are: 1. The Quran which is a record of the divine revelations of Allah to his Prophet Muhammad 2. The Sunnah which is derived from the sayings of the Prophet Under the traditions of Sharia law, judges are usually clerics (Imam). Secondary sources of law, known as Madhab, are based on the works of major jurists in the years immediately after the death of the Prophet. Like many Muslim countries, Iran has a written constitution which upholds the traditions of Sharia law. The role of judges is apply the law and where interpretation is required this must be in accordance with strict and fairly complex Islamic traditions. Page 10
Chapter 2 International Organisations START The Big Picture ExPress Notes Questions in this area tend to be purely of the knowledge type. You are usually asked to explain the role and activities of two or three organisations which are usually just indicated by an acronym eg. UN stands for United Nations. It is important to appreciate that you can start the mark earning process simply by stating what the letters stand for. Past examiner marking schemes suggest that marks will also be awarded for briefly displaying some knowledge of the history and membership of the given organisation. The European Union (EU) The EU as we now know it was established by the Treaty of Maastricht in 1993, continuing on from the previous European Economic Community first established by the Treaty of Rome in 1957. Page 11
Currently the EU is an economic and political union with a membership of 27 sovereign states. EU has aimed to develop a single market by means of a standardised system of laws which apply to all member states and which are designed to provide freedom of movement of goods, services, people and capital. Important institutions of the EU include: European Commission European Court of Justice European Parliament World Trade Organisation (WTO) Replacing the General Agreement on Tariffs and Trade set up in 1947, WTO was established by the Marrakesh Agreement in 1995. With its headquarters in Geneva, WTO currently has 153 members representing in excess of 95% of world trade. The WTO is designed to supervise and liberalise international trade between participating countries by providing a framework for both the negotiation and formalisation of international trade agreements, as well as a dispute resolution process designed to enforce adherence to WTO agreements. Co-operating closely with the IMF and the World Bank, the WTO also does much important work in providing technical assistance to developing countries. International Chamber of Commerce (ICC) Based in Paris, the ICC was established in 1919 to serve world business by promoting trade and investment, open markets for goods and services, and the free flow of capital. With representation in 130 countries worldwide, the ICC has interests covering the vast majority of private sector enterprises and frequently provides expert views to organisations such as the UN and WTO as well as individual national governments. Page 12
Amongst its most significant work has been the establishment of the ICC International Court of Arbitration in 1923 and the development of incoterms. Incoterms (international contract terms) are standard terms widely used in contracts for international sale of goods and have often been the source of knowledge based questions in their own right. The United Nations (UN) Begun in 1945 after the Second World War, currently almost every independent country in the world is a member of the UN. Under its charter the main objectives of the UN are facilitating co-operation in: International law International security Economic and social development Promotion of human rights and the maintenance of world peace In relation to legal matters, important bodies of the UN should be seen as: 1. International Court of Justice 2. International Law Commission 3. UN Commission on International Trade Law (UNCITRAL) UN Commission on International Trade Law (UNCITRAL) Formed in 1966 in order to to promote the progressive harmonisation and unification of international trade law. Representatives of 60 member states are elected to the Commission for a period of 6 years. Elections are made by the UN General Assembly with the intention that the Commission should be representative of the world s different regions and economic and legal systems. Important outcomes of the Commission s work so far as our studies are concerned have been the production of various Conventions and Model Laws. Conventions include: Page 13
Convention on Contracts for the International Sale of Goods Convention on the Carriage of Goods by Sea Convention on International Bills of Exchange and International Promissory Notes Model Laws include: Model Law on International Commercial Arbitration Model Law on International Credit Transfers Model Law on Cross-border Insolvency The Council of Europe (CoE) Perhaps one of the most important things to note from an exam point of view, is that the CoE should NOT be confused with the EU. Based in Strasbourg CoE was founded in 1949 and now covers most of the European continent, with 47 member states. The stated objectives of the CoE are... to create a common democratic and legal area throughout the whole of the continent, ensuring respect for its fundamental values, human rights, democracy and the rule of law. The CoE issues Conventions which are legally binding once adopted by member states and also publishes recommendations which act as guidelines for use by member states in the development of their own national laws. International Institute for the Unification of Private Law (UNIDROIT) Based in Rome, UNIDROIT was established in 1926 and currently has 63 member states drawn from all parts of the world and representing a variety of political, economic and legal systems. UNIDROIT is an independent intergovernmental organisation whose stated purpose is to study needs and methods for modernising, harmonising and co-ordinating private and in particular commercial law as between States and groups of States. Traditionally, UNIDROIT has tended to concentrate on production of conventions, but more recently has shown a preference for production of: Page 14
General principles Legal guidance Model Laws Others In your studies some consideration should also be given to the following: ICJ International Court of Justice OECD Organisation for Economic Co-operation and Development ICA International Court of Arbitration Page 15